Comparative analysis of sensitivity coefficient using traditional beta of CAPM and downside beta of D-CAPM in automobile manufacturing companies

Abstract

The main purpose of this research was to compare the two widely-used pricing models, capital asset pricing
model (CAPM) and downside capital asset pricing model (D-CAPM), in the automobile manufacturing industry
so as to suggest more suitable model that can be used to estimate the expected return rate in such industries.
The comparison was made through defining four hypotheses each focusing on the risk premium correlation
rate as an independent variable with the expected return in the two models, CAPM traditional beta and DCAPM
downside beta, the expected return rate of the two models, and finally the deviation rate of the expected
return from the realized return in both models. The statistical results of testing the hypotheses proved the
superiority of D-CAPM over CAPM to determine the expected return rate in automobile manufacturing
companies.